The insurance industry doesn’t operate in a straight line—it moves in cycles. One of the most important to understand is the shift between hard and soft markets, which are influenced by several factors.
These cycles impact the cost, availability, and terms of insurance coverage in a big way. For medical professionals, this can be especially critical for medical malpractice insurance.
This article breaks down the terms, explores how they play out in medical malpractice, and dives into why today’s market is considered hard—and what that means for physicians.
Insurance markets tighten and relax based on a wide range of factors. A “hard market” typically brings rising premiums, tighter underwriting, and fewer carriers willing to write new business. In contrast, a “soft market” features stable or falling premiums, looser underwriting, and broader availability.
Think of it as the industry’s response to stress—or confidence. Understanding where we are in the cycle helps physicians make smarter choices about coverage.
The insurance market cycle, with its shifts between hard and soft markets, is influenced by current trends such as macroeconomic factors and market conditions, so monitoring these trends is essential for anticipating changes.
Markets don’t harden out of nowhere. Usually, it’s a response to losses—natural disasters, economic downturns, or major legal shifts can all play a role. These shake-ups reduce insurer profitability, prompting them to pull back, get selective, and raise rates.
During hard markets, insurance companies may have less capital needed to underwrite new policies, which further tightens the market. On the flip side, when capital is abundant and claims are under control, competition heats up and the market softens.
You don’t have to look far to find past examples. After 9/11, liability insurance rates spiked. Net premiums and inflation-adjusted growth in the insurance industry have historically surged during such hard market cycles, reflecting increased rates and reduced capacity.
Property lines followed suit after Hurricane Katrina. In contrast, the early 2000s saw a soft market thanks to lower claim frequency and an influx of capital. These cycles are nothing new—but their impact is always felt.
Medical malpractice insurance has had its own version of this story. In the early 2000s, jury awards surged—especially in states without tort reform. Social inflation, driven by societal attitudes and changes in the legal system, contributed to rising liability costs and larger jury awards, including so-called nuclear verdicts. Carriers hiked rates or left markets altogether.
Later that decade, reform and stabilization efforts helped soften the market. Rates came down and coverage got easier to secure. But starting in 2019, things started tightening again. Rising claims, massive jury verdicts, and inflation have all driven premiums up. We’re in another hard phase now, with more complexity layered in.
Medical malpractice insurance isn’t like other kinds of insurance. Claims are less frequent, but when they hit, they hit hard. Long timelines, emotional jury dynamics, and localized legal conditions create a uniquely high-risk environment. Two doctors in different states—and even different counties—can pay wildly different rates for similar coverage.
Specialty also matters a lot more here than in most insurance segments. Unlike certain industries within the broader commercial insurance sector, where risk profiles and market dynamics are shaped by factors like natural disasters or economic trends, medical malpractice is driven by unique legal and medical risks that set it apart.
Here’s where things diverge. General insurance lines often respond to broader economic indicators. But medical malpractice insurance is driven by specific legal climates, jury behavior, and specialty risks. A company might be solid in homeowners or auto—but drop medical malpractice altogether if one region becomes too volatile.
Property insurance and cyber insurance are also influenced by market cycles, with property insurance premiums affected by factors like natural disasters and construction costs, while cyber insurance faces unique challenges in pricing and coverage flexibility during hard markets.
You know you’re in a hard market when options dry up and prices start rising quickly. High-risk specialists and those practicing in litigious states often face deductibles or higher deductibles, tougher terms, and fewer renewal offers. Some are pushed into surplus lines with even stricter policies.
Stricter underwriting criteria often result in less coverage being available to high-risk specialists, making it more challenging to secure adequate protection. These conditions don’t reverse overnight.
Example 1: A neurosurgeon in Florida sees their annual premium jump from $80,000 to $105,000 in just two years. Then their carrier exits the state, leaving few choices and stricter terms. Higher premiums and changes to insurance policies are common outcomes in hard market scenarios.
Example 2: An OB/GYN in Illinois gets a non-renewal notice—even with a clean record. With litigation surging in Cook County, their insurer stops writing new policies, and rates skyrocket.
It’s due to a wide variety of factors. Legal costs are climbing, jury verdicts are bigger, and reinsurance—the financial backstop for insurers—is more expensive. These pressures lead to price increases and a significant premium increase across the industry.
Costly claims, driven by rising inflation and higher loss expenses, directly affect insurance pricing and contribute to higher insurance premiums and overall insurance costs for policyholders. Add healthcare inflation to the mix and every claim costs more to resolve. Read more about the courtroom dynamics behind the numbers in our nuclear verdicts blog.
Where you practice matters significantly, too. States like New York, Florida, and Illinois top the charts for average premiums. Local tort laws, judge behavior, and litigation culture all play a part.
But not all news is bad. States like Texas and North Carolina—with aggressive reforms and lower litigation rates—have seen flat or even slightly declining premiums. Property rates in these states have also remained stable, reflecting the impact of local reforms on insurance costs.
Curious how your state compares? Our medical malpractice payouts by state blog breaks it down.
Some specialties are just more exposed. Surgeons, OB/GYNs, and ER doctors operate under constant pressure with high-severity risk. Their premiums reflect that. Insurers assess each specialty's risk exposure and the anticipated likelihood of future claims, which directly influence premium costs for different specialties. Meanwhile, dermatologists and family medicine doctors often pay much less.
Check our specialty hub for how your field stacks up.
Short answer: hard.
Rates have been rising steadily since 2019. In hard markets, insurance carriers typically reduce their appetite for new business and tighten underwriting standards. Fewer carriers are writing new medical malpractice business and underwriting standards are tightening. According to the 2023 Medical Liability Monitor Annual Rate Survey, average premiums rose by 5% nationwide, with double-digit hikes in places like Florida and Illinois.
So what’s driving this?
Underwriting losses, as indicated by a combined ratio above 100, have pressured insurers to raise rates. Lower investment income and fluctuating interest rates have also impacted profitability. Leading insurers are adjusting their risk strategies to maintain profitable results in the face of increased risk, and these challenges are expected to persist for the foreseeable future.
It’s a perfect storm, and it’s reshaping how medical malpractice insurance is priced and delivered.
Actually, yes—there are signs of hope.
New carriers and MGUs (Managing General Underwriters — specialized firms that underwrite policies on behalf of insurers) are entering the space. Some regions are seeing more competition and reinsurance markets are rebounding. Tech is changing the game too.
AI tools are speeding up quoting, improving underwriting, and helping insurers better match pricing to real-world risk. The result? More accurate premiums, faster service, and potentially—eventually—lower costs. Increased competition and improved risk assessment could put downward pressure on premiums, leading to lower claims, lower insurance premiums, and insurance decreases in the future.
If you’re a physician or administrator navigating today’s hard medical malpractice insurance market, here are a few things to keep in mind:
Medical malpractice insurance remains in a hard market cycle, driven by legal complexity and rising costs. Insurance pricing will continue to be influenced by these factors as the market evolves. But the tide may be slowly turning. As competition increases and tech-driven solutions take hold, some relief could be on the horizon. The market may not be soft yet—but the rigidity is beginning to crack.
Curious where your rate stands?
Get a quote or explore specialty-specific options to see how you compare in today’s market.
Image by Olena Bartienieva from iStock.
